Hong Kong has long been recognized as the shopping capital of Asia for luxury goods. The news that sales in the segment fell 17.1% year over year in June amid increasingly volatile anti-government protests will, therefore, be of great concern to local retailers and major international luxury groups alike.
Hong Kong protesters began rallying June 9 to demand the withdrawal of an extradition bill that would allow suspects to be sent to mainland China. Despite Hong Kong Chief Executive Carrie Lam saying the bill is dead, the protests are becoming increasingly frequent and violent.
A number of industry giants including Kering SA, Compagnie Financière Richemont SA and Prada SpA highlighted the instability in Hong Kong in their most recent earnings reports. But the demonstrations were relatively peaceful in June compared to what has come since. That means results in July and further into the third quarter could be affected more deeply.
Hong Kong's luxury retail industry is already feeling the effects of international trade tensions, slowing tourism and growing competition from mainland China. The protests add to these troubles and in some cases — as with attracting shoppers from the mainland — exacerbate them.
With no end to the demonstrations in sight, the true impact on luxury retail may not be known until companies reveal their third-quarter Asia sales.
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